One of the biotech stocks under $5, Progenity Inc. (NASDAQ: PROG) is a biotechnology company that develops and commercializes molecular testing products to improve the diagnosis and treatment of disease. It focuses on fields like women’s health, gastrointestinal health, and oral biotherapeutics. PROG dropped 26% since November 10th after a run which started at the end of September. The stock has been catching investors’ interest as speculation of buyout mounts and the company moves forward with its innovative tech pill – two catalysts which could send PROG well beyond $5 per share.

Catalysts

Following a string of bad earning reports, PROG began a turnaround in late September in part due to its developing biotechnology. One of the biggest challenges in the treatment of gastrointestinal diseases like IBD is delivering the medication directly to the colon. Luckily, PROG has made recent progress in developing its Drug Delivery System (DDS) to deliver liquid drug formulations to specific locations in the gastrointestinal tract. This improves the efficacy and safety of the treatment but is also a potentially lucrative breakthrough for the company.

Typically, delivering large molecule medications in a targeted approach would require needles. But PROG’s needle-free delivery system allows for more frequent oral administration and possibly more constant drug levels. With this in mind, Progenity is developing “drug-device combination products” which are formulated using its proprietary liquid formulations to replicate prescribed drugs that can be delivered through its oral biopharmaceutical delivery system.

Delivering large molecule treatments orally opens the door to treating cancer, diabetes, and rheumatoid arthritis in a more convenient manner. Taking the first steps towards commercialization, PROG announced in mid-October that the US Patent and Trademark Office has issued four patents related to its delivery system for treating the gastrointestinal tract. This is in addition to the company’s 180 issued patents and over 220 pending applications which make up “one of the most robust ingestible device patent portfolios” according to Progenity’s interim CEO – Eric d’Esparbes.

Clearly, this revolutionary technology makes PROG a significant buyout candidate – a speculation that has been supported by the company’s three collaborations with pharma companies for developing its Oral Biotherapeutics Delivery System. As the company itself states, this illustrates “industry interest in the platform’s potential for the oral delivery of large molecules”.

Because of this technology’s applicability to many big pharma treatments, some are anticipating buyout interest from the likes of Pfizer, Abbvie, Amgen, NovoNordisk, or Eli Lily. For example, Pfizer’s medication “Xeljanz” – used to treat rheumatoid arthritis, psoriatic arthritis, and ulcerative colitis – is generically known as Tofacitinib which Progenity has already completed research regarding its targeted delivery and potential for higher tissue absorption.

According to its clinical publication, the study showed that over 25x more Tofacitnib was administered to the target location while reducing the number of total toxins compared to the typical treatment. This has led some investors to speculate that Progenity has a partnership in the works with Pfizer; but even if it does not, the company has the type of breakthrough technology that would attract interest across the board.

Meanwhile, short interest on PROG has reached 26.37% after a short squeeze effort started forming on Reddit in October. PROG has also regularly made Fintel’s list of top short squeeze candidates as its setup becomes reminiscent of SPRT before its gamma squeeze. This has led longs to hold out against shorts on the conviction that a high profile partnership announcement is developing behind the scenes.

Fundamentally, PROG is showing significant progress after its latest earnings report revealed the company’s plans for cost-cutting measures that will save around $145 million on an annual basis. It also marginally reduced its operating expenses and has reduced its outstanding debt by $20.175 million through a private exchange of its 7.25% convertible senior notes.

Media Sentiment

Putting PROG’s less than stellar earning reports aside, investors like @shawonsarker84 and @TRUExDEMON have the DD to show PROG is one of the biotech stocks under $5 that won’t stay cheap for long.

Technical Analysis

biotech stocks under $5 PROG stock chart

PROG is currently trading at $2.97 with a primary support at 2.89 and a secondary support at $2.30. The stock shows a resistance point at 3.75 and 4.01. Despite the dip, accumulation has remained steady and the RSI is at 38 – indicating it is becoming oversold. However, the MACD just had a bullish crossover.

Should You Buy

Considering PROG’s market cap of $394.24 million, the company could be undervalued but the stock has a float of 116.55 million making it prone to volatility. Whether a gamma squeeze comes to fruition has yet to be seen, but the potential for Progenity to utilize its technology in new and lucrative ways is increasingly tangible. If the partnership rumors between Progenity and Pfizer prove true, then PROG shareholders could see a major return on investment. However, other investors argue that the company is notably undervalued considering its technology making it a possible long term hold for bullish investors. In either case, PROG is shaping up to be one of the best biotech stocks under $5 to buy and could hit a double digit price target in the event of a short squeeze.

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